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The Ritz-Carlton Hotel Company, L.L.C.

The only two-time recipient of the Malcolm Baldrige National Quality Award
in the service category, The Ritz-Carlton Hotel Company manages 36
luxury hotels in North America, Europe, Asia, Australia, the Middle East,
Africa, and the Caribbean. All have received four- or five-star ratings from
the Mobil Travel Guide and diamond ratings from the American Automobile
Association.

The Ritz-Carlton competes against nearly 10 hotel groups in the “luxury”


and “upscale, deluxe” categories in the industry. Sales totalled almost $1.5
billion in 1998, with services provided to meeting and event planners
accounting for 40 percent of the total. Independent business and leisure
travellers constitute the next largest customer
segment.

More than 85 percent of the company’s 17,000 employees—known as


“The Ladies and Gentlemen of The Ritz-Carlton”—are front-line workers in
hotels. Through extensive training programs and by offering opportunities
for professional development, the company encourages personnel to
advance in the organization. Ritz-Carlton President and Chief Operating
Officer Horst Schulze began his career in the hospitality industry as a
waiter’s apprentice at a hotel in Europe.
An independently operated division of Marriott International, Inc., since
1997, the 16-year-old company is headquartered in Atlanta.
Highlights

• In an independent survey, 99 percent of guests said they


were satisfied with their overall experience; more than 80
percent were “extremely satisfied.”
• Any employee can spend up to $2,000 to immediately correct
a problem or handle a complaint. First-year managers and
employees receive 250 to 310 hours of training.
• Pre-tax return on investment and earnings (before income
taxes, depreciation, and amortization) nearly doubled since
1995.

• From field of 3,528 nominees, selected “Overall Best


Practices Champion”—1998 study by Cornell School of Hotel
Administration and McGill University.

‘To be the Premier Provider ...’

Winning the 1992 Baldrige Award was both acknowledgment that Ritz-
Carlton was an exemplary performer in the pursuit of excellence and an
impetus for further improvement. Company management raised the
threshold throughout the organization.

Goals for customer satisfaction were raised to the “top of the box.” Earning
ratings of very or extremely satisfied became a top priority as well as a key
element of The Ritz-Carlton strategy to achieve 100 percent customer
loyalty. In its operations, the company set the target of “defect-free”
experiences for guests, implementing a measurement system to chart
progress toward elimination of all customer problems, no matter how
minor.

Management took actions to realize other major opportunities for


improvement. It revamped its strategic planning process to make it more
systematic, and it refined its total quality management system, with the aim
of achieving fuller and deeper integration into the organization. One output
of this reassessment is the “Greenbook.” Now in its second edition, the
Greenbook is The Ritz-Carlton handbook of quality processes and tools, a
nearly constant reference that is distributed to all employees.

Efforts to reduce employee turnover and to address employee morale


issues—challenges faced by the entire hotel industry—also were
undertaken. For example, hiring selection processes were refined and
streamlined, and a new initiative—“Pride and Joy”—gave employees a
larger role in the design of their jobs. Turnover rates have declined nine
years in a row and levels of employee satisfaction are trending upward.

Pyramid Concept

To help set a clear direction for continuous improvement and to align


actions at all business and operational levels, The Ritz-Carlton has
developed its pyramid concept. Positioned at the top is the company’s
mission: “To be the premier worldwide provider of luxury travel and
hospitality products and services.” Succeeding levels consist of The Ritz-
Carlton 10-year mission (product and profit dominance), five-year mission
(broken down into 14 “vital few objectives”), tactics for improving key
processes, and strategies and action plans for sharpening customer and
market focus. These tiers are underlain by the company’s total quality
management system and methods.

Finally, The Ritz-Carlton values and philosophy make up the base of the
pyramid, serving as the foundation for all continuous improvement efforts.
The company goes to great lengths to instil and reinforce the philosophy
and values in all employees. Everyone receives a wallet-sized copy of the
“Gold Standards,” which consist of the company’s Motto, Credo, Employee
Promise, Three Steps of Service, and The Ritz-Carlton Basics—essentially
a listing of performance expectations and the protocol for interacting with
customers and responding to their needs. These are reinforced in training
(which totals 250 hours for first-year front-line employees), in the daily five-
to 10-minute briefing at the start of every shift, and through the company’s
reward and recognition system.

A new pyramid is developed every year during strategic planning. To set


the stage, an extensive “macro environment analysis” is performed and the
results are distributed to senior leaders well before the first strategic
planning session. The analysis considers factors ranging from the world
economic outlook and global supply of hotel rooms to actions of key
competitors and from indicators of customer and employee satisfaction to
supplier relations. A key output of the planning process that follows are the
“vital few objectives” for the next three years. These are organized into
categories corresponding to strategic goals, such as 100 percent customer
retention, or to organizational unit, such as new product development.
Appropriate performance measures are identified for all objectives, and
senior managers are assigned responsibility for assuring the quality and
reliability of data for tracking them.

Understanding Customers in Detail

At every level, The Ritz-Carlton is detail-oriented. Steps for all quality-


improvement and problem-solving procedures are documented, methods
of data collection and analysis are reviewed by third-party experts, and
standards are established for all processes. Key processes also are
dissected to identify points at which errors may occur. For example, to
meet its goal of total elimination of problems, The Ritz-Carlton has
determined that there are 970 potential instances for a problem to arise
during inter-actions with overnight guests and 1,071 such instances during
interactions with meeting event planners.

To cultivate customer loyalty, The Ritz-Carlton has instituted an approach


of “customer customization,” which relies on extensive data gathering and
capitalizes on the capabilities of advanced information technology.
Information gathered during various types of customer contacts, such as
responses to service requests by overnight guests or post-event reviews
conducted with meeting planners, are systematically entered into a
database, which holds almost a million files. Accessible to all Ritz-Carlton
hotels worldwide, the database enables hotel staff to anticipate needs of
returning guests and to initiate steps that will help to ensure a high-quality
experience.

This attention to detail and the company’s commitment to continuous


improvement is delivering benefits. For example, in 1998, more than 80
percent of meeting planners reported that they were extremely satisfied
with their overall experience—up from fewer than 70 percent a year earlier
—and 99 percent said they were satisfied. Among overnight guests
questioned in an independent survey, nearly 75 percent reported extreme
satisfaction with their overall experience at The Ritz-Carlton, as compared
with fewer than 70 percent for the nearest competitor’s guests.

Financial performance also is trending upward. Total fees; earnings before


income taxes, depreciation and amortization; and pre-tax return on
investment have nearly doubled since 1995, with Return on Investment
increasing from 5.3 percent in 1995 to 9.8 percent in 1998. Revenue Per
Available Room (the industry’s measure of market share) continues to
grow, exceeding the industry average by more than 300 percent.

For further information, contact:


Patrick Mene
Vice President, Quality
The Ritz-Carlton Hotel Company, L.L.C.
3414 Peachtree Road NE
Suite 300
Atlanta, GA 30326
Telephone: (404) 237-5500
Fax: (404) 261-0119
E-mail: pat.mene@ritzcarlton.com
Web Site: www.ritzcarlton.com